Property owners pay to 'settle' schools' tax-value appeals

Sunday

Property owners owe taxes to schools, parks, libraries, county agencies that protect children and help the developmentally disabled, and others.

Property owners owe taxes to schools, parks, libraries, county agencies that protect children and help the developmentally disabled, and others.

But what if they could cut a deal to pay just the schools and make part of the potential bill that they owe the others disappear?

It's happening more and more as businesses settle property-value disputes with a "direct payment" to a school district in return for the district dropping a case in which it claimed that a parcel's appraised value was too low. The district gets its money as if it had won the tax case, but other agencies continue to receive payments based on the lower appraisal.

"It's definitely happening more frequently, as schools are looking for more sources of revenue, and taxpayers are looking for ways to ease their burden," said Jeff Rich, a Columbus attorney specializing in property-tax cases.

One reason is that the state Board of Tax Appeals is swamped with cases after the state cut its budget in half, forcing it to reduce its number of hearings examiners from 10 to three. During the fiscal year that ended in 2007, it took 16.6 months on average to dispose of a complicated case with continuances; last year, it took 30.4 months.

Each examiner had a docket of 2,000 cases in fiscal 2011, according to the agency's annual report. In an effort to work off the caseload, the agency hired back three more hearings examiners last fiscal year.

The deflating property-price bubble caused the number of cases filed at the state agency to skyrocket from 1,574 in fiscal 2007 to a peak of 4,679 in fiscal 2010. The number of new cases dropped to 4,166 in fiscal 2011.

In just the past year, 10 of the 14 cases settled by the Columbus schools involved the district's receiving a direct payment in lieu of taxes, mostly from businesses fighting for a lower tax appraisal. The 10 payments totaled $837,000.

In essence, the district was able to extract the money because it had strong evidence - usually a recent sale price - that the property owner was paying too little. The property owner, on the other hand, settled the case by paying the district what it was owed and pocketing what would have been paid to the other taxing bodies.

The payments aren't so much taxes as an out-of-court settlement.

Among the cases settled by Columbus schools for a direct payment were:

• A Walgreens drugstore at 1168 Harrisburg Pike that sold in 2005 for $4.23 million. The Columbus schools persuaded the Franklin County Board of Revision to boost the tax value from $2.18 million to that sale price. The owner appealed to the state Board of Tax Appeals, but before the case could be heard, the district settled, taking $161,000 - what it would have received if the value were set at $4.23 million - in exchange for leaving the value at $2.18 million.

• The district ended a fight by agreeing to tax-exempt status for the German Village Society's building in return for an $88,875 direct payment.

• The district agreed to leave the appraisal of an assisted-living facility at more than $2 million below its $5.4 million sale price in return for a payment of $133,346 - the money the district would have been owed if the sale price had been used.

• The Lowe's Home Center store at 2345 Silver Dr., near Crew Stadium, saw its tax value almost halved by the county Board of Revision, from $12 million to $6.3 million. The district appealed to the state, but for a direct payment of $281,500, it agreed to drop its challenge of the $6.3 million valuation.

Because the Columbus school district accounts for less than 70 percent of the total property-tax bill, paying only the school district results in the property owner saving more than 30 percent off what would be owed based on a higher valuation.

"We would obviously like to receive the taxes, the millage, at the fair assessed value of the property," said Jed Morison, superintendent of the Franklin County Board of Developmental Disabilities, which collects $180 million in property taxes each year.

Morison wasn't aware that cases were being settled with direct payments, but "it sounds like it's something that maybe we should address," he said.

Franklin County Auditor Clarence Mingo, whose office initially sets tax values, said that he doesn't find direct payments objectionable because the other taxing bodies have the ability to intervene in the cases if they wish.

But "the school district undoubtedly is the major player" and is acting in its self-interest, Mingo said.

bbush@dispatch.com

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